Innofactor : Interim Report for January 1–September 30, 2015 (IFRS)

Innofactor Plc Interim Report October 20, 2015, at 8:30 Finnish time

*) The third quarter of 2014 included a one-off cost reserve related to the closing of the St. Petersburg office for about EUR 59 thousand. The second quarter of 2014 included a one-off cancellation of a cost reserve related to the integration, amounting to about EUR 135 thousand.

**) The third quarter of 2014 included a one-off cost reserve related to the closing of the St. Petersburg office for about EUR 59 thousand and a financing cost reserve related to the Enabling acquisition for about EUR 400 thousand, a total of about EUR 459 thousand. The second quarter of 2014 included a one-off cancellation of a cost reserve related to the integration, amounting to about EUR 135 thousand, and financial income of EUR 216 thousand from the additional purchase price related to the acquisition, a total of about EUR 351 thousand. The first quarter of 2014 included financial income of EUR 325 thousand for the additional purchase price related to the acquisition.

***) In the group company, an error in the assessment of projects was detected concerning the period of January 1-June 30, 2015, in the current financial period as well as the previous financial periods. The assessment error has been corrected for the above-mentioned periods in accordance with IAS 8: 41-42. The total effect of the error is approximately EUR 552 thousand. Adjustments and their effects on the Group figures are described in more detail in the attachment to this interim report.

Innofactor's net sales and operating margin (EBITDA) in 2015 is estimated to increase from 2014, during which the restated net sales were EUR 43.8 million and operating margin was EUR 3.8 million.

The figures in this interim report have not been audited.

Innofactor operates on a single segment, offering software, systems and related services.

In the third quarter of 2015, Innofactor's net sales were EUR 9.3 million, which shows a decrease of 3.5% compared to the corresponding period in the previous year. The operating margin (EBITDA) was EUR 0.8 million (8.1 percent of the net sales), which shows a decrease of 15.4 percent since last year.

On September 16, 2015, Innofactor terminated the contract of the Country Manager in Denmark due to suspected misconduct and lack of confidence. The above-mentioned has been part of the reasons leading to the error in project assessments, due to which Innofactor is correcting in this interim report the group figures for the first and second quarter of 2015. For the time preceding the current financial period as a whole, the figures are corrected to the last quarter of 2014. The effect of the corrections in the Innofactor group's operating margin for 2015 is approximately EUR -0.24 million, for the operating margin of 2014 it is EUR -0.31 million, and in total approximately EUR -0.55 million.

Because investigations, actions with local authorities and other legal proceedings concerning the possible misconducts in the Danish subsidiary are in progress, it is not yet possible to estimate the potential amount of compensation for damage. Anthony Gyursanszky (Innofactor's Chief Operating Officer) has been appointed as the Country Manager for Denmark. He has led the rearrangement of the operative processes and management of the Danish business to comply with Innofactor's corporate governance principles and to ensure profitable growth in accordance with the strategy in Denmark.

The Innofactor group has paid attention to strengthening the transparency of its operations. One of our central actions has been to increase the resources of the Nordic ERP process started in spring 2015, in order to complete the project quickly. In Innofactor's business culture, a strong trust in knowledgeable personnel and management will remain as a central factor.

Despite the above-mentioned write-offs, Innofactor's growth in the first three quarters of 2015 was 0.8 percent (net sales EUR 31.9 million). The operating margin (EBITDA) was EUR 2.0 million, which shows a decrease of 15.1 percent since last year. The cash flow from business activities in the first three quarters of the year was strong, increasing to EUR 2.5 million from the previous year's EUR -0.5 million.

Innofactor updated its strategy in September. I am very satisfied with the strategy process, which we went through with the Board of Directors, renewed Executive Board, other management and personnel. Our renewed mission to 'empower organizations and people to make a difference in a digital world' describes well the passion, which was the basis on which I founded Innofactor 16 years ago. It also describes the way we in Innofactor want to still work daily with our customers and their customers and employees. The digital world offers totally new possibilities for the success of both organizations and individuals. On the basis of its renewed strategy, Innofactor has been planning on its operations for the next few years and will next move on to budgeting.

We think that Innofactor has good prerequisites to continue growing its business operations profitably in 2015. For Innofactor, the last quarter has typically been stronger than the other quarters.

Innofactor is still actively looking for new strategic partnerships in the Nordic Countries. The group will seek growth, which can be organic or based on mergers or acquisitions.

Main forces affecting the markets are the transfer of software into the cloud, increased significance of social media, mobile devices and Internet of Things, data analytics and machine learning, and data security and protection. A clear change in the purchase habits of customers has been observed as these business changes are taking place. The customers expect the IT provider to focus more on business benefits instead of technology benefits. The customers want the providers to have solutions that are ready for use without a need to make changes, and they want to be able to buy more continuous services instead of large one-off projects.

Innofactor estimates that the growth of IT service market in 2015 will be 0-1% in Finland and 1-3% in other Nordic Countries. The estimate is based on research institutes' forecasts and Innofactor's outlook on markets.

As concerns Microsoft-based solutions, competition in the Nordic Countries is divided between different kinds of parties. The first group is formed by large companies that operate in all of the Nordic Countries. Typically, these companies offer a wide range of IT solutions for companies and organizations, using several competing technologies of which Microsoft technology is one option. The second group is formed by companies that focus on a narrower solution area in the Nordic level. These companies also offer IT solutions for companies and organizations using several competing technologies of which Microsoft technology is typically just one option. The third group is formed by companies operating in just one country. These small or medium-sized companies often focus on one solution area, client and/or field.

Innofactor has made a strategic choice by focusing on solutions implemented with and utilizing the Microsoft platforms and by selecting as its solution areas the ones in which Microsoft's growth and offering, and thus its partners' and ecosystem's growth, has exceeded the general average growth of IT service and software markets many times over. Innofactor is primarily focused on Nordic large and medium-sized companies and government organizations, which have high standards in their IT solution acquisitions. Innofactor develops solutions, products and services suitable for this group by itself and in cooperation with its partners. Innofactor's strategy supports well the change in the markets. Innofactor believes it can gain market share from its competitors and utilize possible IT market growth in the future.

Microsoft's partner network in the Nordic Countries, and also elsewhere in Europe, is quite fragmented and mainly consists of a large number of small and medium-sized local providers. For Innofactor, this provides interesting potential for consolidation and globalization. Innofactor's good reputation, unique proofs of rapid and profitable growth and successful acquisitions together with business culture with entrepreneurial spirit make it a very attractive partner when making reorganizations in the field in the Nordic Countries.

Espoo, October 20, 2015

INNOFACTOR PLC
Board of Directors

Additional information:
CEO Sami Ensio, Innofactor Plc
Tel. +358 50 584 2029

On October 20, 2015, at 9:00 Finnish time, Innofactor will hold a briefing concerning the interim report in Finnish for the media, investors and analysts at the company's premises at Keilaranta 9, Espoo. The report will be presented by CEO Sami Ensio and CFO Janne Martola. The presentations of the briefing will be available on Innofactor's web site after the briefing.

We ask you to register for the briefing beforehand by sending email to .

If required, Innofactor will also hold a conference call in English for analysts, media and investors on October 20, 2015, at 16:00 Finnish time. Registrations to before 12:00 Finnish time on Monday, October 19, 2015.

The financial statement for 2015 and the interim report for October-December 2015 will be published on Tuesday, March 1, 2016. The annual report for 2015 will be published on the company's web site on Tuesday, March 8, 2016. The preliminary plan for the Annual General Meeting is that the meeting will be held on Tuesday, March 29, 2016, at 9:00 Finnish time.

The schedule for financial releases in 2016 is as follows:

April 12-25, 2016: Silent period

April 26, 2016: Interim report January-March

July 5-18, 2016: Silent period

July 19, 2016: Interim report January-June

October 11-24, 2016: Silent period

October 25, 2016: Interim report January-September

Distribution:
NASDAQ OMX Helsinki
Main media
www.innofactor.com

Attachment: Innofactor Plc's interim report for January 1-June 30, 2015 (IFRS)